The International Sustainability Standards Board should be established, according to the Basel Committee.

Published on: 09 December 2021
by KnowESG
ESG Regulations

A Brief Summary

The Basel Committee will explore using Pillar 3 of the Basel Framework to promote a common disclosure baseline for climate-related financial risks across internationally active banks. Consistency and comparability in sustainability reporting across sectors and over time are essential to promote transparency and market discipline, and the Basel Committee looks forward to continued collaboration with the IFRS Foundation as future disclosure standards for climate-related financial risks are developed.

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The Basel Committee on Banking Supervision applauds the International Financial Reporting Standards (IFRS) Foundation's announcement today that it will establish the International Sustainability Standards Board (ISSB) to develop global standards to improve sustainability reporting's consistency, comparability, and reliability.

The provision of relevant information on common key risk measures to market players minimizes information asymmetry and aids in the comparability of banks' risk profiles, making disclosure requirements a critical component of a sound banking system. Banks need precise information from their clients and counterparties to identify and manage climate-related financial risks. The Basel Committee looks forward to continuing collaboration with the IFRS Foundation as future disclosure standards for climate-related financial risks are developed. Consistency and comparability in sustainability reporting across sectors and over time are essential to promote transparency and market discipline, and the Basel Committee looks forward to continued collaboration with the IFRS Foundation as future disclosure standards for climate-related financial risks are developed.

The Committee agrees with the IFRS Foundation's proposal to produce internationally uniform disclosures by collaborating with relevant standard setters and building on current initiatives and frameworks, such as the Task Force on Climate-related Financial Disclosures (TCFD).

Parallel to the ISSB's work, the Committee will look into using Basel III's Pillar 3 to promote a standard disclosure baseline for climate-related financial risks among internationally active banks. The availability and reliability of sufficiently granular data for banks and their counterparties, as well as established risk measures, will be examined in this study.

The Committee's work on Pillar 3 is part of a comprehensive approach to tackling the wide range of climate-related financial risks to the banking system, which includes regulatory, supervisory, and disclosure-related elements.

The Committee will continue to work with the International Financial Reporting Standards Foundation (IFRS Foundation) and other international forums, such as the Financial Stability Board (FSB) and the Network for Greening the Financial System (NGFS), to ensure that the conditions for a high-quality and globally consistent disclosure framework for climate-related financial risks are met.

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